Today’s newsletter is more of a state of the union for the housing market and overall economic review now that the year is coming to a close.
For starters home values for 2015 will have appreciated approximately 5.4 – 6.3% depending on which index you focus on. The Case-Shiller Home Value Index shows that home prices in the 20 major cities in the United States are up 5.4% from the same time last year. The FHFA Housing Index indicates that home prices are up 6.3 percent from the same time last year. This index measure single family sales.
Overall price appreciation seems to be heating up as of late as housing inventory continues to remain tight. The exciting news for 2016 is that many analysts along with Fannie Mae, Freddie Mac, and the National Association of Realtors, all seem to be in agreement that purchase volume should increase in 2016. More home sellers are expected to place their homes on the market now that more people are in positive equity positions than a year ago.
Mortgage rates, despite the Fed’s recent increase of 1/4%, have remained virtually unchanged. Low mortgage rates will continue to make home ownership affordable. It has been a while since we have seen this, but recently a number of articles have been written about how homeownership remains more affordable than renting in many areas. This can be a catalyst to bring more first time buyers into the market.
The biggest challenge to many first time homebuyers is the ability to save for a down payment. The good news is that more and more we are seeing the return of low down payment mortgage programs which will reduce at least one barrier to entry for home purchasers.
Student debt continues to remain a challenge for Millennials and even though the down payment requirements are dropping, affording student debt payments along with a mortgage can may prove problematic for some first time buyers.
The labor market, despite all of the celebration about low unemployment, remains challenging for college graduates. The level of underemployment for graduates for the last 2 years remains very high. There are plenty of low wage jobs available however graduates attempting to enter the workforce on a career path are finding landing that first job quite tough.
Consumer confidence appears to be on the upswing finishing out the year. Although the official holiday sales numbers are not out yet, some early reports from the credit card companies indicate a vast improvement in sales from last year. Mastercard reported that they have seen retail sales jump 7.9 percent from last year. It is expected that Visa and American Express will show similar increases.
The biggest challenge facing retail is what the future holds for brick and mortar retailers. Online shopping has exploded this year and the retail stores are seeing a significant decline in foot traffic. This has been a trend over the last few years however 2015 appears to show a more dramatic decline.
Next week begins business for 2016. I look forward to keeping you abreast of all that is happening.
As your mortgage and real estate professional, I am happy to assist you with any information you may need regarding mortgage or real estate trends. I welcome the opportunity to serve you in any way I possibly can. Please feel free to reach me at (707) 455-7070.